GERMANY Trends and Developments Contributed by: Tanja Schienke-Ohletz, Flick Gocke Schaumburg
Exception: choice of law However, the EU Succession Regulation opens up an important option: the testator can choose the law of his or her nationality as the applicable inheritance law in his or her will. A German testator residing abroad can therefore ensure that German inheritance law con- tinues to apply to his or her estate by making a cor- responding choice of law. He or she should expressly state this in his or her will. Application in relation to third countries? Although the EU Succession Regulation ( Europäis- che Erbrechtsverordnung – EuErbVO) only applies to member states, it also applies to Germany in relation to third countries. However, these countries are not bound by it. Therefore, uniform substantive inherit- ance law is usually only applied in EU countries. Third countries often apply their own conflict-of-law rules, which do not correspond to those of EuErbVO. It may therefore be that both a member state and a third country consider themselves to have jurisdiction or declare different laws applicable. In such a case, corresponding testamentary dispositions should be made in both jurisdictions in order to reconcile the two legal systems. Violation of public policy as a limit to freedom of contract? The various European legal systems differ consider- ably in some respects with regard to compulsory por- tion rights, freedom of testamentary disposition and succession rules under company law. While German inheritance law recognises compulsory portion claims but generally allows relatively extensive freedom of testamentary disposition, other legal systems provide for significantly stricter restrictions. It is therefore not unusual for a testator who lives in Germany but has a different nationality to invoke this nationality when choosing the applicable law because it contains more favourable provisions for him or her – for example with regard to compulsory portion rights. However, this freedom of choice is not unlimited. A central barrier is the public policy of the state in ques- tion. In private international law, public policy serves as a corrective measure to prevent the application of foreign law if its outcome would be incompatible with the fundamental values of the legal system of the
International Aspects of German Succession Planning – Best Practice The increasing internationalisation of asset struc- tures, company shareholdings and family relation- ships means that succession planning in Germany is increasingly taking on cross-border dimensions. Fam- ilies own assets in several countries, family members live abroad and a company’s operations can span several jurisdictions. This raises complex issues for advisers in international private law, international inheritance law and international tax law. Whereas traditional succession planning used to be predominantly national in nature, modern succes- sion structures increasingly require a co-ordinated approach across multiple legal systems. This applies in particular to the question of applicable inherit- ance law, the tax treatment of asset transfers and the risk of international double taxation. A fundamental understanding of these legal frameworks is therefore essential for foreign advisers working with German entrepreneurs or German assets. International inheritance law and its significance for succession planning One of the key issues in cross-border succession is determining the applicable inheritance law. In the European Union, this issue is largely regulated by the EU Succession Regulation (Regulation (EU) No 650/2012). The aim of this regulation is to avoid con- flicts between different national inheritance laws and to create a uniform connection. Principle: habitual residence is decisive for the application of substantive inheritance law In principle, the law applicable to the estate is deter- mined by the habitual residence of the deceased at the time of death. The principle of unity of the estate applies – ie, there can be no division of the estate. The entire estate is governed by the jurisdiction in which the deceased last had his or her habitual residence. If, for example, a German deceased person lives per- manently in France or Spain, the inheritance law of that country applies to his or her entire estate, even if a large part of the assets are located in Germany.
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